Probate sales can appear to be a harrowing process. You might feel a pinch of anxiety from a lack of resources or a lack of knowledge. You’re not alone. Probate can be a difficult process for families to navigate.
The problem is that probate has many pitfalls and opportunities to drag out. That’s not good for anyone.
As you navigate the probate process, you might feel the need to get rid of a house that is causing your problems. Along with the motivation to sell, you want to ensure that you sell your house for a fair price.
In this article, we’ll go over the steps to sell your home during probate and for a fair price. We’ll also discuss ways that you can avoid the hassle of realtors, repairs, and months of agonizing uncertainty by selling your house on your terms.
Let’s get started with the definition of selling a house in probate.
Selling a House in Probate-Definition
Probate is a court process that directs and guides the resolution of a deceased person’s estate. In other words, probate is the legal process in which the decedent (dead person) has their assets divided up. These assets can include:
- Real estate
Each state has its own probate laws and local courts that decide exactly how the process will play out.
In general, probate is necessary to ensure that the last will and testament is valid and represents the deceased’s wishes. Part of the process includes making sure that the dead person’s property goes to the intended beneficiaries.
When the deceased has a will, they may leave instructions on what should happen to their assets. One scenario is that they leave real estate and instructions of how to dispose of the property to a beneficiary, a person designated to receive a portion of the decedent’s estate.
Another situation arises when there is no will, or the will is unclear about how to dispose of the home. This sticky situation is referred to as being intestate.
In either case (will or no will), the court may get involved and determine that selling a house in probate is the fair and equitable solution. Some reasons for a court-supervised probate sale include:
- Paying off creditors
- Settling the estate’s debts
- Missing, or unclear will
As previously mentioned, most states have their own probate laws. Some states adhere to the Uniform Probate Code. The code is meant to smooth over the sometimes probate process made difficult by competing and confusing state laws.
Some states have opted to adopt all or portions of the code to make the probate process less onerous. After all, when someone dies, it might be tough for the family to navigate thorny legal issues while grieving.
When there is a will and named beneficiaries, probate is an easier process. Typically, the estate names an executor to administer the estate and make sure the assets go to the intended beneficiaries.
In most cases, probate is necessary to sell property whether a will is present or not. Here is how courts typically handle probate when someone dies with:
- No children, no heirs–estate goes to the remaining parents
- No children, heirs, or parents–estate is divided among siblings
- No will, parents, siblings, heirs–estate is split equally among both sides of the family
Probate becomes increasingly difficult when heirs or creditors contest the contents of the will. There is a subset of people who may contest the will include:
- Potential heirs
- Disinherited family
- Property co-owners
They typically object during probate for one or more of the following reasons:
- Claims of pressure or fraud
- Mental fitness
- Failure to meet legal requirements
- Newer will
- Transfer of ineligible property
- Defects in the will
Probate laws and intestacy
Intestacy is a legal situation in which someone dies without a will; this occurs with an estimated 50% to 60% of Americans.
When the decedent is intestine, the probate court determines how to divide up the dead person’s estate. In general, the court awards the estate using the following hierarchy:
- Distant relatives
Each state has laws that specifically dictate how a court disposes of the estate.
Probate for real estate may pose additional challenges. Usually, the home is the largest asset in a will. If the home is owned by the decedent, then the beneficiary keeps it. But if the home has an outstanding mortgage, the beneficiary will need to pay it off with cash or apply for a new mortgage.
Multiple heirs complicate probate and the sale of a home is usually the remedy. The court then splits the proceeds among heirs.
Can You Sell a House in Probate
Yes, you can sell a house in probate. It may be the case that you inherited a home and you don’t want to deal with costly repairs and renovations, a new mortgage, multiple claims on the home, or to avoid foreclosure.
The executor of the state does not need to wait for the probate’s completion before selling a home. In some states, you can sell the home without the court’s supervision and you can avoid official probate procedures and restrictions. This is called informal probate.
With informal probate, the executor of the will will need to use the proceeds to pay off the estate’s debts and then distribute the remainder to the heirs. This might be a way to avoid probate costs that can exceed 3% of the total estate’s value.
Process for Selling a House in Probate
The process for selling a house in probate can be complex. Often, when the estate does not have enough cash to pay its debts, the solution is to sell the property.
Suppose a person died with no assets other than a home worth $150,000 and a mortgage debt $25,000. The home would need to be sold to pay the remainder of the mortgage. The proceeds left over would go to the heirs. If a person is intestate (no will), then the property is sold and the proceeds are split between the heirs.
The probate process is court-controlled and time-sensitive. Here is the process for selling a house in probate.
#1: Determine the executor
When a person dies with a will, there is a person named and entrusted with overseeing the estate. They are responsible for making sure the estate pays debts and disperse assets to the beneficiaries.
#2: Swear in the executor
The person swears under oath and in court that they will follow the instructions found in the will. If there is no will or the named person refuses, the court names an executor. It’s usually the closest relative to the deceased.
#3 Probate petition
The executor files a petition for probate with the local probate court.
#4: Evaluate the estate
The executor inventories and appraises the estate’s value. The evaluation and appraisal cover:
- Bank accounts
- Personal property
- Real estate
#5: Give notice
Local courts will have specific rules, but in general, the executor must give public notice before the property is given to heirs. The public notice is meant to inform creditors and potential heirs.
The preceding steps are general steps that get started. As part of the proceedings, selling a house in probate may be required. The following is the process for selling a home in formal probate.
To sell a home in probate, you have to get a home appraisal. A home appraisal enables you to sell the home for maximum value. You’ll want to find a respected, trustworthy, and credentialed appraiser.
The appraisal sets the asking price of the home. One contingency of probate court is that the home must sell for at least 90% of the appraisal price. The executor petitions the court and then the sale of the home can begin as a part of formal probate.
#7 Sell the house
After the appraisal, you’ll need to proceed with the probate sale. That sale will include marketing, showing, and staging the home.
Usually, the executor handles the details of the transaction. The home can be listed using the multiple listing service (MLS). That allows your home to show up on sites like Zillow and Realtor.com. Depending on where you live, the home can also be sold without a real estate agent to a cash buyer. A cash buyer will buy the house as-is and close quickly, unlike listing your home which could take months of stress and expensive repairs.
If you do decide to list the home, buyer’s agents will be able to find the home and know that it’s a probate sale.
Real estate agents can be prohibitively expensive and bog down the probate sale. That added dimension costs you time, money, and peace of mind.
Let’s discuss the real estate commission. It’s often the largest closing cost that a seller will encounter. As a seller, you’re responsible for paying both the seller and buyer agent’s commission, usually 6% of the sale’s price. The 6% figure comes from the seller’s agent’s 3% commission and the buyer’s agent’s 3% commission.
#8 The sale
Keep in mind that buyers are aware that your home is a probate sale. That matters because they will be looking for a deal. Since this sale is part of formal probate, you’ll need to petition the court every step of the way.
The petitions take time and using a real estate agent to sell your home in probate may be a protracted process. In some instances, the sale of the home takes more than six months.
That may mean six months of mortgage payments that you have to pay. Or it might mean that the home sits vacant for six months which presents a different set of issues including, but not limited to:
- Unseen damages
- City code violations
- Loss of insurance coverage
The buyer makes an offer and must pay a 10% deposit, then there is a requirement to advertise the probate sale in the newspaper. After an offer is made, you schedule a hearing in court.
While you wait for the hearing, the executor mails a notice of proposed action to the heirs with the terms of the sale. The heirs have 15 days to review the notice and object to any of the terms.
Then the executor petitions the court to approve the sale and set a date for final approval and confirmation.
Even if a buyer is in place, there can still be some drama at the final hearing through the overbidding process.
In some states, even if a buyer is locked in with an offer, the court allows other people to show up at the sale confirmation hearing and bid on the property. Before the final approval, the court asks anyone in the court if they would like to bid on the property.
People in the court have the option to bid on the property, but the bid must be 5%, plus $500 above the original buyer’s offer. The process will continue until the highest bid available is made.
If a new buyer wins, the original buyer gets their 10% deposit back and the new buyer must produce their 10% deposit. The home is sold “as is” with no contingencies and closes within two weeks, usually.
#9 Pay estate’s debts and tax burden
After the sale, the executor must use the proceeds of the home sale in probate to pay for debts and taxes.
#10 Pay heirs
After the executor settles debts and taxes, the remainder is paid to the heirs according to the probate’s results.
Process for selling a house in informal probate
Sometimes, the probate court authorizes an informal probate process. Informal probate is allowed when there is an original will and there is no contest. Even if there is no will, you can proceed with informal probate if the heirs are known and there are no disputes.
An informal probate process is easier than a formal process and does not require attorneys. The process for selling a home in probate informally includes:
- The executor files the will and probate forms with the local probate court
- The probate court delivers Letters of Testamentary
- The executor uses the letters of testamentary to manage the real estate transaction
The informal process allows you to avoid the bidding process and the court does not interfere with the process. Usually, the informal process takes much less time because the court does not need to supervise every step of the way.
Selling a house can be a hassle and you may not feel like you have the resources and knowledge to sell your home. Also, the home may be a burden on you and you want to sell the home quickly for a fair price.
You don’t need a realtor to sell your house. Selling your home for cash to a company that specializes in those types of transactions may be the right solution for you. Companies that make cash offers are among the fastest ways to sell your home. Typically, these companies are local investors who have cash on hand.
Since they have cash in hand, there is no waiting period for financing, mortgage paperwork, or expensive closing costs. What usually happens is that a cash company sets up a consultation and closes within a week; they want to help you sell your home fast.
Selling a house in probate can be complex. The court process provides a resolution when someone dies and the estate needs to be divided among heirs.
Probate laws vary from state to state, but typically provide procedures for the disposition of estate with a will, or with no will. You are able to sell a house in probate through formal or informal processes.
For formal probate, you will need to name and empower an executor to handle the real estate transaction and keep the court abreast of the progress every step of the way. This may be a time and labor-intensive process. Informal probate is easier and quicker, but requires an uncontested will and known heirs.
Cash buyers can be powerful allies when selling your home during probate because they expedite the home-selling process.